Writing for the Atlantic, Matthew Yglesias points out that the subprime mortgage crisis is beginning to affect people who have the misfortune to live near people who made unfortunate decisions:
...the crisis is harming the neighbors of people in foreclosure, even those who aren’t having trouble making loan payments. According to one academic study, every foreclosure reduces the value of all other houses within an eighth of a mile by about 1 percent, as the sight of vacant property scares off potential buyers. Combine that with a market already in decline, and neighborhoods that begin to have troubles can go off the cliff. On the street pictured [see link], three houses not in foreclosure have been languishing on the market for 72, 97, and 149 days; asking prices along the cul-de-sac vary widely, but average about $40,000 less than the comparable prices in the first two quarters of the year.
This phenomenon seems to be strongest in fast-growing, middle-class areas with new housing, such as parts of Florida and Nevada. Yglesias includes a map of the hotspots, along with a map of one hard-hit street in Three Lakes, Florida.
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